Question

Lily factory allows its departments to operate as autonomous units. Their results for the current year were as follows: Candy Beverage Packaging Revenues $2,200,000 $670,000 $1,200,000 Current assets 320,000 112,000 535,000 Capital assets 765,000 488,000 1,320,000 Current liabilities 276,000 107,000 432,000 Net operating income 312,000 57,000 420,000 After-tax income 218,000 39,000 299,000 Weighted average cost of capital 7.5% 7.5% 7.5%

Required: For each division compute the: 1. Return on sales






2. Return on investment based on total assets employed

3. Economic value added












4. Residual income based on net operating income

Answer 1